Face Off: Will the Competition Ordinance benefit small and medium enterprises?

Face Off: Will the Competition Ordinance benefit small and medium enterprises?

Each week, our two teenagers will debate a hot topic. This week …


Kowk Kwok-chuen (Left), member; Anna Wu Hung-yuk (Centre), Chairman; and Rose Webb (Right), Senior Executive Director, of Competition Commission.
Photo: Nora Tam/SCMP

Joseph Ho Hei-chi, 19, University of Hong Kong 
The Competition Ordinance "prohibits any behaviour that prevents, restricts or distorts competition". It plays a big role in protecting small and medium enterprises (SMEs), which can only survive in a market which has a level playing field.

The ordinance lowers the barriers which make it hard for SMEs to enter the market. Before, large corporations could take advantage of their market share to kick SMEs out of the scene.

Take supermarkets, for example. The existing market is mainly shared by Wellcome and ParknShop. With their huge bargaining power, they maintain low costs by requesting discounts from suppliers, or charging them to store their goods.

Some years ago, there were hundreds of small shops in Hong Kong. Today, the number is less than 50. This shows that without a Competition Ordinance, it is difficult - if not impossible - for SMEs to survive.

Some SMEs may fear committing anti-competition offences themselves, because many SMEs are involved in things like price-fixing.

However, as we've seen in other countries, the chances of an SME being sued by the government are small. The ordinance mainly targets large corporations, as they're the only ones which can easily manipulate the market. In the US, the law states that any concerted (anti-competition) behaviour will not be scrutinised by the authority if their market share does not exceed 20 per cent.

Hong Kong's regulatory body will screen out trivial complaints, so SMEs are protected from accusations of "evil intentions" by their competitors.

Snehaa Senthamilselvan Easwari, 15, South Island School
Hong Kong's Competition Ordinance has three basic rules - the same rules found in competition laws all around the world. The first law is about anti-competitive agreements; the second concerns abuse of market power; and the third is the merger rule, which prevents mergers that would reduce competition in a market.

SMEs do not benefit from the Competition Ordinance mainly because they are "minor players". The whole point of the competition law is to help SMEs and prevent the abuse of power within a market - monopolies by larger firms. But this won't happen under the Competition Ordinance.

The chairman of the Hong Kong Small and Medium Enterprises Association Danny Lau Tat-pong says smaller firms run the risk of "stepping on a landmine" if they share any data at seminars or social gatherings. He believes that the main reason these firms join a trade body is to gain commercial information. But the new law prevents them from doing this, so these firms must now be conscious of what they say. He says he fears that the law will snare the SMEs instead of the big tigers.

Moreover, the Second Conduct law doesn't concern SMEs because they are highly unlikely to have substantial market power. On the contrary, they could be victimised by anti-competitive conduct.

Overall, even though the main purpose of the Competition Ordinance was to provide justice for small and medium enterprises, its impact on SMEs is very small. But by introducing more laws, we can ensure that SMEs don't become victims of larger, more powerful firms.

This article appeared in the Young Post print edition as
Will the Competition Ordinance benefit small and medium enterprises?


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